The Tobacco Deal - U.S. Tobacco Industry Case Study

Five key companies dominate the U.S. tobacco industry. These corporations mainly specialize in the manufacture and sale of cigarettes. At the forefront, controlling almost half of the U.S. market for cigarettes and owning the Marlboro brand, lies Philip Morris Companies, Inc. Only half of their revenues come from the sale of tobacco products; Philip Morris also includes and owns food and beverage businesses, notably Kraft and Miller Brewing.

Next in line is RJR Nabisco Holdings Corp. This company's tobacco subsidiary consisted of R.J. Reynolds, who produced products such as Camel and Winston cigarettes. The food subsidiary of the company, Nabisco, accounted for approximately half of the company's revenue, however the majority of sales and profits came from their cigarettes.

The ladder 3 companies, consisting of BAT Industries, Loews Corporation, and the smallest being Brooke Group Ltd., are the other players in the field. BAT, being based in Britain, was the manufacturer of brands such as Lucky Strike and Kool cigarettes.

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Loews' holdings included that of the Lorrillard Tobacco Company, who produced cigarette brands Kent, Newport, and True. Brooke's Liggett division mainly specialized in discount varieties of cigarettes, such as Chesterfield, L&M, and Lark to name a few. These 5 companies were being called out in the case known as The Tobacco Deal.

For years the tobacco industry had adequate defense against government regulation and lawsuits. By maintaining that tobacco and cigarettes had not been proven to cause cancer or other disease, the tobacco industry was able to overturn all lawsuits filed up until 1996. Warning labels invoked in 1965 on cigarette packaging helped companies to argue the fact that consumers knew the harmful effects associated with smoking, but assumed the consequences and the risks anyway. Coupled with large donations to political parties, these factors helped the tobacco industry to...

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8 pages1261Jun/20033.9

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